Colder winter spurs increase in natural gas demand

By Rebecca Maitland, jobs correspondent |
March 13, 2014

Texas oil and gas producers achieved one of the upstream sectorâs most successful years in 2013, according to the Texas Petro Index.

Texas and most of the United States have seen one of the coldest winters in recent years, and for the natural gas industry, that actually has been beneficial.

"Due to the cold weather, there is a greater demand for natural gas. Natural gas prices have been depressed for almost five years now. With this cold weather we are seeing a turnaround, and prices are beginning to go up. If this trend continues, we will see an increase in drilling for natural gas," said Alex Mills, president, Texas Alliance of Energy Producers.

Texas oil and gas producers achieved one of the upstream sector's most successful years in 2013, according to the Texas Petro Index (TPI).

"Last year Texas set all kinds of records for production, mainly for oil, with double-digit increases. Without being able to see the future or anything unforeseen happening, I believe the 2014 upstream industry will beat the 2013 numbers. If prices and the economy remain stable, then the oil and gas industry will continue moving upward," Mills said.

In 2013, Baker Hughes' count of active drilling rigs in Texas averaged 843, compared to 838 in December 2012. Drilling activity in Texas peaked in September 2008 at a monthly average of 946 rigs before falling to 329 in June 2009. The statewide rig count reached a 2013 peak of 848 in August.

However, the rig reports do not indicate production.

"With new technology, many wells are being drilled from one pad, so the key here is not to focus on the rig count, but look at the production numbers, which have continued to increase for the past three years," Mills said.

The TPI, a composite index based upon a comprehensive group of upstream economic indicators, reached 295.0 in December, which is the fourth consecutive month that the TPI has reached new heights. The previous record was set in September-October 2008. Nearly all the growth in 2013 was crude-oil driven, but the bottom line received a boost from higher wellhead prices for natural gas.

"The statewide upstream oil and gas economy in July finally recovered fully from December 2009 and surpassed the previous peak TPI (287.6) achieved in late fall 2008. Although most indicators of industry activity were higher at year-end 2013, compared to the prior year, the story of the year was crude oil production in Texas," said Karr Ingham, the economist who created the TPI.

"By our estimates," Ingham said, "statewide crude oil production grew by about 21 percent in 2013 compared to 2012, which was up more than 34 percent compared to the prior year. And those increases are part of a trend that has been under way for several years."

That trend is expected to continue throughout 2014 and beyond.

"Crude oil production in Texas in 2013 totaled 856.8 million barrels, about 120 percent greater than the 389.9 million barrels of oil produced in Texas in 2007. In fact, the volume of oil produced in Texas in 2013 accounted for about 31 percent of all U.S. oil production and is the highest statewide total since 1985," Ingham said.

Producers recovered an estimated 856.8 million barrels of crude oil in 2013, a 21.2 percent year-over-year increase and the sixth consecutive year in which statewide production increased, according to Texas Alliance of Energy Producers.

And again, those numbers are expected to increase in 2014.

If the oil and gas industry continues to move upward, more job openings will be added to the thousands that are open today, which employers are having a difficult time filling. Many energy-industry employers are training on the job, others are sponsoring courses at area colleges and business schools, and many others are working with Texas Workforce Commission to help fill the positions.

Those interested in working in the oil and gas industry, even if they have no or limited experience in the energy sector, can contact TWC, local colleges or go online to www.workintexas.org.